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U.K. to Tax Revenues of U.S. Tech Giants

By Rich Smith - Mar 11, 2020 at 5:25PM

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Alphabet and Facebook, eBay, Amazon, and PayPal all sit squarely in the crosshairs.

In July 2019, France enacted a Digital Services Tax (DST) on large tech companies -- U.S. tech companies in particular were effected, as they are the largest in the world. This sparked a massive trade kerfuffle with the Trump administration. Now ,the U.K. is wading into these same troubled waters, enacting a DST of its own.

As Marketwatch reports today, the U.K. Treasury revealed in recent "budget documents" that it wants to implement a DST against revenues generated by "search engines, social media services and online marketplaces." After exempting the first £25 million of U.K.-sourced revenue, the tax will be implemented at a 2% rate.

It will be levied only upon companies generating in excess of about $643 million globally, and about $32 million in the U.K. Judging from these thresholds, the U.K. DST will still easily capture, and subject to the tax, U.S. tech giants such as Alphabet (GOOG -2.57%) (GOOGL -2.45%), Facebook (META -1.64%), Amazon (AMZN -2.49%), eBay (EBAY -2.34%), and PayPal (PYPL -2.28%) -- and probably many more besides.

Hands reach out to grab a big pile of money

Image source: Getty Images.

Unlike most corporate taxes familiar to Americans, which focus on profits, the DSTs envisioned by France and the UK would tax companies' revenues -- taxing them at 2% in the U.K. and at 3% in France. The French tax specifically will target revenues raised from the sale of digital advertising, e-commerce, and sales of user data, similar to the areas of focus sketched out in the U.K.'s plan.   

France's DST will be applied retroactively to capture revenues beginning in January 2019, but the U.K.'s tax won't kick in till April.

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Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
$2,179.26 (-2.45%) $-54.77, Inc. Stock Quote, Inc.
$106.21 (-2.49%) $-2.71
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$161.25 (-1.64%) $-2.69
eBay Inc. Stock Quote
eBay Inc.
$41.67 (-2.34%) $-1.00
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,187.45 (-2.57%) $-57.68
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
$69.84 (-2.28%) $-1.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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